A Strategy To Increase Financial Returns For Your Business

It is the start of a new year and a new decade.  This year can be the best ever for your business.  You want to improve your financial returns and see the benefits of all your hard work.

Your employees are your best asset – you often say as much.   But do you really mean it?  And, if you do, do you know how to get the best from them?

This is where a strategic Human Resources (HR) plan comes in.

Why do I need a strategic HR plan?

You may know what your Human Resources team is employed for.  They are there to recruit people, to write policy which will protect your business.  And then to implement that policy and make sure it is followed.  When things go wrong, HR is there to help you with difficult things like redundancy or disciplinary action. Even the really bad stuff- like dismissing people.  HR will then support you if the worst happens and legal action is taken against you in the Employment Tribunal.

But what about strategic advice?  You have strategic financial plans and marketing advice.  But there is no need for an HR presence at the top table – HR is an operational, back-room function.  It is a necessary drain on the business.  It doesn’t produce any revenue, or improve your profits.  Or does it?

What difference does HR strategy make?

Human Resource planning should be at the heart of every business decision you make.  If your employees truly are to be your best asset, then doesn’t it make sense to invest in them? A strategic HR plan will help you to maximise the investment in your employees – which is very likely to be your largest investment.

A strategic HR plan will show you how to  improve your financial returns on that investment.

What are the financial returns from a strategic HR plan?

In terms of real financial returns, there are six key areas where a strategic HR plan can make an enormous difference for your business.

  • Return on Sales

Each sale is worth more if your production costs are kept down.  This includes recruiting the right people in the shortest possible timescale.  It means retaining them in the business once they have been recruited.  Strategic HR can help you manage the performance of the individual and look after their wellbeing.  All of those things make them work efficiently and effectively and reduces production costs.

  • Return on Assets

If you get the right people in place, train them properly and look after them, then your assets will be better maintained.  The use of the assets will be optimised.

  • Revenue growth

This really just means more sales, which can be achieved by better customer service and increased numbers of customers.  Again, your employees are key to this and a proper strategic HR plan can have a huge impact on this aspect of the business.

  • Profitability

Profitability is increased because of the revenue growth, as already discussed.  Again, if you look after your employees, then your expenses will be reduced (less absence, greater retention, higher work rate).  Because your revenues are up and your expenses are down, then your profitability is increased.

  • Market capitalisation

If your company is traded on the stock market, then your value per share is important.   Your employees are key to this equation, as they affect all the other financial impacts, as discussed above.  If your employees feel valued and loyal, then there is likely to be a positive effect on market capitalisation.

  • Revenue per employee

Finally, if your employees are happy and feel valued and engaged in their work, then they will be more effective and efficient.  This, coupled with reduced absence and lower turnover, can impact your revenue per employee.  This is another critical area for the business where a positive HR strategy can really pay dividends.

HR – a critical strategic business partner

This all demonstrates the fact that strategic HR has a positive impact on all of your financial measures.When your staff are happier, you spend less on absence cover, recruitment, performance improvements, and so your financial returns improve on sales and on assets.

If customer service has improved and the speed and amount of work has increased, then the obvious outcome is revenue growth and higher revenue per employee.   And because your revenues have improved and your expenses are reduced, this means that your profitability is higher.

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Strategic HR – Making The Difference (A Return On Investment)

How is strategic HR making the difference in Business and what is the return on any investment you  make in HR strategic support?

This can be broken down into three important areas of impact.  These are the operational impacts, the impact on the employees and the financial outcomes.   They are, of course, all interlinked and of equal importance.

Where is strategic HR making the difference?

The most obvious sphere of influence for an HR professional is the impact on the employees, isn’t it?  That is, after all, what HR means – Human Resources, ie. the people.  But the three areas are closely related.  If the employees feel valued and included then they will be loyal to the Business.  Customer service will improve and the impact on the Business operations becomes more clear.

If employees are achieving at work each day and feel loyalty to the Business, then staff turnover will slow down.  You will find it is easier to recruit and keep your employees.  Those employees will be more productive and will perform their work to a higher standard.

If the operational side of the Business improves, then that will have an impact on the financial outcomes.  Profitability will improve and you will start to see revenue growth.

The impact on your employees

If you have strategic HR support for your business decisions and planning, and if you continue to use HR strategy to improve your employee relations, then the impact on your employees is tangible and marked. When your employees understand their purpose and their importance to the Business, then they begin to appreciate other benefits of working for you.  That is strategic HR making the difference.

If employees feel valued and included, they will perform better.  This improves their sense of achievement and loyalty to the Business. Additionally, this means their interest, enthusiasm, customer service all improve.  They will be positive about the Business and your employer reputation will be enhanced. This will help to improve recruitment, turnover, sickness absence rates.  The cycle of improvement will spiral upwards. Again, strategic HR making the difference.

Operational Impacts

In addition to improved turnover, absence statistics, performance as outlined above, there are other potential operational impacts of strategic HR intervention.  Improved performance leads to higher quality and fewer concerns about safety.  If employees are engaged, then they will notice if things are not quite right and they will care about making improvements.  You will find it easier to comply with legislative and governance requirements.  This leads to a lower risk of legal actions against your Business.  Improved performance can also lead to an improved rate of completing tasks and a higher amount of work being achieved.

Your employees are critical to the smooth running of your Business.  They are a major component of the potential achievement of your business goals.  Your employees are your most important investment and it is wise to nurture that investment.

Financial Outcomes

Arguably, the most important impact that strategic HR support can have is on your bottom line.  The financials are, after all, one of the main reasons why you set up the Business in the first place.

If you take care of the people aspects of your Business, you will find that there is a positive impact on all of your financial measures.

When your staff are happier, you spend less on absence cover, recruitment, performance improvements, and so your return on sales and return on assets both improve.

If customer service has improved and the speed and amount of work has increased, then the obvious outcome is revenue growth and higher revenue per employee.   And because your revenues have improved and your expenses are reduced, this means that your profitability is higher.

A necessity, not just “nice to have”

As with most things in life, some planning and preparation go a huge way to making business successful.  The right support is important, as you run your Company on a daily basis.  You pay for strategic financial and marketing advice, so why not include strategic HR support?

This article has demonstrated that an HR strategist can provide a real and tangible return on your investment. By all means, continue to use an in-house administrator or your Personal Assistant to record sickness and absence. Or to calculate maternity pay and leave and other administrative tasks which you might consider to be HR responsibilities.  But if you value your Business and want to improve your bottom line, then please contact us for a no-obligation chat about the difference that strategic HR can make for your Business.

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Strategic HR – Helping You Build Loyalty, Growth and Profit

Strategic HR – this article explains what it is and how can it benefit organisations and employees alike.

Most people know what they think the Human Resources team is all about.  But it will depend on their point of view.  An employee (especially one who has had a difficult time with an employer) might say that HR is the place to go to complain when something goes wrong.  They might think HR is there to look after their welfare, or to pay them.  They probably think that HR recruited them in the first place.

On the other hand, an employer might think that HR is there to protect them.  They use HR to write their policies and processes so that they are legally compliant.  They rely on HR to deal with difficult people problems and enforce the rules.

Of course, HR professionals can do any or all of those things – and much more as well. But what about strategic HR – how is that different?

Your strategic HR partner

An HR strategist should be a true partner to your business.  We should be engaged at Board level, working with the Managing Director. Our role is partnering with the business in decision making, business planning, marketing, financial planning.  This will ensure that the people elements of every decision are considered.

For a business to be successful, the people who work there are key to that success.  Every employer says “our employees are our best asset”.  This is true – good, happy, engaged people are the very best  tool you can have in your business.

A good HR strategist will help you to ensure that your people really are your best asset.

How strategic HR can help you

An HR strategist looks at your business challenges from the perspective of the impact on employees and workers – current and future.  So when you are doing your business planning, an HR strategist can inform your thinking about training and development needs; recruitment needs; potential restructure or even what to do with the people who have skills which are now obsolete.  We advise on legalities and best practice to help you decide on your priorities.

Of course, this can then all feed into the formulating of policies and procedures, but they will be aligned to your business objectives and needs, rather than “off the shelf” standard processes.

A quick internet search for the most common business challenges reveals: recruiting and retention; technological changes; regulation and legislation; financial management.  All of these challenges can and should be planned and prepared with input from an experienced HR strategist.  We should be advising on the people aspects of your marketing planning, your financial objectives, your growth plans.   All of these things have an impact on your employees, or are affected by your people, their skills and behaviours.

Benefits to you if you get the people strategy right

Employee (and customer) loyalty, business growth and improved profits are three of the benefits of a good HR strategy.

If you get the people element right, your employees will look after your customers.  They will be your best advocates.  Additionally, you will gain their loyalty, so they want to continue working for you and they will be unlikely to go off sick so often.  People will enjoy being at work and so will put in effort. They will go the extra mile for you when you need to meet a deadline or deal with a particularly tricky client.  Your staff will speak highly of you and you will build a reputation as a good employer.  That will make recruitment easier.

In terms of growth, engaged employees will look after your customers.  They will look after your suppliers.  As a result, they will look after your business and prevent stagnation.  You will have employees with better skills and a better attitude.   Your improved reputation will grow your customer base.  Your suppliers will be keen to do business with you.

These things naturally lead to increased profit and profitability. Additionally, engaged and productive employees will help you to streamline your processes.  They will lead to better ways of doing things.  You will find it easier to attract the good candidates for your roles.

Is it time for a business overhaul?

If you get a reminder that your car is due a service, then you would not ignore the warnings.  You may not want to spend the money, but you know that the cost could potentially be far higher if things start to go wrong with the engine.   Even if you did manage to overlook the service, you would certainly take action if the orange warning light came on to show that your engine oil was low. The consequence for ignoring that one would be too great to contemplate.  The engine could seize up while you or someone else was driving.   Even if you managed to avoid injuring someone, the cost would be huge and there is a danger of losing all your confidence and pleasure in driving.

The moral of this story, of course, is that you should be prepared to spend a little time and money  for regular servicing of your car – and your business –  by a professional.

Don’t ignore the warning signs

Then there were the ignored warnings.  In business terms, these warnings may be high staff turnover, or maybe a large amount of sickness absence.  Or maybe some of your employees  do not get on with each other, or some employees are not performing very well.   How many businesses ignore those kind of warnings and end up with an expensive crisis – maybe even defending legal action.  Or it might be just the loss of a key employee and a difficult and costly recruitment exercise.

That is what strategic HR is all about – it is the planning and servicing which an employer needs to get professional help with.  If you have those warning signs in your business, or you just feel that your company culture is not quite what you intended it to be, then we need to have a no-obligation discussion about whether and how I can help.

If you think this article is useful and you would like to know more,  please join our mailing list, or contact us for further guidance.